10 Easy Tricks to an Increased Net Worth in 10 Years

Written by Sam on . Posted in Education, Inspiration, Investing. 3366 views.

Of course it’s easiest to say “make more money and spend less”, but sometimes that’s not possible or even desirable.  Here are 10 tricks to increase your net worth without increasing your income:
  1. Auto-deduct from your paycheck.  It’s not necessarily bad to spend 100% of the paycheck you receive – just make sure your savings are taken out before you get it.  Most employers who allow for direct deposit allow you to specify multiple accounts.  This makes it easy for your living expenses to go into a checking account and a set amount to go directly into a separate savings account.  If this is not an option for you, automatic monthly transfers from checking to savings can also be effective.  $50 a check can add up quickly.  Recommended best-selling read:   The Power of Habit: Why We Do What We Do in Life and Business, by Charles Duhigg.
  2. Transfer, pay down, then eliminate your debt.  We all know that credit card interest rates are sky high.  If you’ve run up a high balance, consider transferring the balance to a new card (cancelling the old one) to take advantage of the lower, introductory rates.  Follow this up with paying off the balance, then allocating what you were paying in credit card bills to amounts you’re contributing to savings.
  3. Contribute to a Roth IRA account.  Most people do not realize that there is typically NOT a penalty to remove the funds you’ve contributed to a Roth IRA.  Since the government also allows for qualified contributions to be withdrawn for education, housing and medical, why not contribute (get the tax benefits) then withdraw down the road if you need to? See IRS Site for the complete list of qualified distributions*
  4. Pay extra mortgage principal.  A typical new mortgage payment is comprised mostly of interest ($1100 payment can be $960 interest, $140 principal).  An efficient trick is to pay extra principal each month to avoid paying interest on it in the future.  Paying an extra couple hundred bucks per month could allow you to pay your 30 year mortgage off in 15 years.
  5. Max out employer matched contribution plans.  Most employers provide 401(k) and/or Employee Stock Purchase Program benefits.  These are like most other benefits, such as healthcare, which cost your employer money.  Your salary is affected (and decreased) by these benefits – more money going out in benefits equals less to pay employees.  Therefore, get the most out of your employer by taking full advantage of any matching programs.  It’s “free” money!
  6. Create a budget.  While it’s not fun to be on a budget, it is very useful and can be extremely successful.  Knowing how much you spend on discretionary items is painful, but useful.
  7. Set your dividends to reinvest.  Most retirement and brokerage accounts allow you to elect to have your cash dividend reinvested in the stock/fund without paying a commission/fee.  This feature saves you in fees and may allow your portfolio to compound quicker.
  8. Avoid fees!  Whether it’s a mutual fund, brokerage, management, interest or transfer fee – deductions from your principal can slow your growth.  Paying for expertise which leads to higher returns is one thing, paying management fees when you could easily switch brokerage firms is another.  Do your research, find out exactly how much you’re paying and why.
  9. Minimize your taxable income – maximize deductions.  For example, few people know that the current long-term capital gain rate is zero percent (0%) for certain taxable income levels (and a low 15% for all others)!  Work with your accountant to identify tax savings which probably will not exist in the future.  A penny saved (in taxes) is a penny earned!*
  10. Focus on a diversified asset allocation.  Working with a financial adviser (or doing it yourself) to properly allocate between diversified stocks and bonds will help to avoid the stress of market downturns.  Getting funds into accounts through all of the above is half the battle, sustaining returns is the other.

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Comments (4)

  • John Young

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    Great List!

    Reply

  • Shelley

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    I’ve always heard to pay extra mortgage payment…after reading this I called my mortgage company to verify, they agreed that it would bypass interest payment. Thank you!

    Reply

  • Daniel

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    Exactly what I needed today. Smart ideas.

    Reply

  • Diana

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    Some of these are HARD! Worth the effort I guess tho :-)

    Reply

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